Expert Financial Analysis and Reporting

Northwest Biotherapeutics: How Much Will It Cost to Manufacture DCVax-L (NWBO, Buy, $7.26)

There has been a lot of speculation about how much it costs to manufacture one course of individualized therapy of DCVax-L. In its manufacturing process, autologous living cells are removed from the patient’s body, manipulated ex vivo and then injected back into the body. This may take seven to eight days, has a number of steps and is highly labor intensive. It is much more costly than small molecule drugs and monoclonal antibodies so it does raise the question of how profitable DCVax-L will be if it is approved.

CAR-T cells are manufactured in the same way as DCVax-L and their costs are probably comparable. There have been wide estimates on the cost of manufacturing CAR-T cells with the wildest being an estimate by Citigroup analysts who were quoted as saying in a Wall Street Journal article that “Citigroup believes CAR therapies could cost in excess of $500,000 per patient, which it notes is roughly in line with the cost of a stem cell transplant.”

I recently spoke at a conference with Hans Bishop, the CEO of Juno Therapeutics, which is one of the leading CAR-T companies. I asked him how much it would cost to manufacture one course of treatment for its CAR-T product. He said that they are currently paying academic centers $40,000 for producing CAR-T cells for one patient. He believes that when they get their manufacturing up and running that the cost will be substantially less, perhaps on the order of $20,000 (this is my estimate, not his).

Northwest has not given any estimates on what the manufacturing cost of DCVax-L is or will be. My checks with sources not involved with NWBO but familiar with autologous cell manufacturing havee suggested that the cost of DCVax-L currently is probably on the order of $40,000 like the price that Juno pays to academic centers. It may be less as NWBO has a more advanced manufacturing process. At commercialization, my guess is that manufacturing costs for both DCVax-L and CAR-T will be around $20,000 per patient. NWBO will not comment on the accuracy of this estimate, but I think it is in the ballpark. If DCVax-L were priced comparably to the $97,000 per course of therapy which is the same as Provenge, it would have a healthy gross profit margin of 80%. This would make it a highly profitable product.

I think that this largely debunks one of the never ending stream of negatives conjured up by short sellers that it doesn’t matter if DCVax-L is approved because it will be so expensive to produce that NWBO will never make a profit. An article to this effect appeared on Seeking Alpha; it was written by an anonymous author who used the pseudonym Biotech Hawk. The article was published on September 26, 2014 on Seeking Alpha and was entitled “Northwest Biotherapeutics Valuation = $0”. The author’s conclusions were that cost of goods sold for DCVax-L would be $100,000+ per patient, that there was no indication that manufacturing costs could be brought down and no reasonable expected sales price would make the business profitable. He projected that NWBO would go bankrupt even if DCVax-L were to be approved. The arguments he presented that led to this conclusion were unfathomable.

The article was pretty much shredded by people on Seeking Alpha who commented on it, but Biotech Hawk did find an ardent supporter in Adam Feuerstein who commented

“Nice work. You're probably under-estimating the manufacturing costs of DC Vax-L because it requires a tumor sample from each patient as part of the manufacturing process. Provenge only requires each patient to undergo leukapheresis. DC-Vax-L requires a sample of the brain tumor plus leukapheresis. Logistical nightmare. Huge costs. Will never scale. Even with decent volume, Dendreon's margins were meh. NWBO will never get DC-Vax-L approved, but even if the impossible happened, the business is doomed. Dendreon is a champ compared to NWBO. Again, nice work.”

Biotech Hawk has published just four articles on Seeking Alpha and each was a highly negative article on Northwest Biotherapeutics. Each was contrived, unbalanced, unsupported with data and with wild incoherent arguments that were clearly intended to put pressure on the stock. Biotech Hawk appears to be an operative for the short sellers of NWBO. It is amazing to me that Seeking Alpha would allow an anonymous author to publish articles like this on its website.

10 Comments

Hi Larry – thanks again for all the work you do. Your articles are so helpful at keeping me and others up-to-date on the biotech companies you follow.

That’s an interesting note at the end of your article about Biotech Hawk. On Yahoo message board, there had been a poster who called himself “Jerry Cambell_ma” who began posting the same time – literally the next day – after Biotech Hawk published his first article on NWBO entitled “Northwest Bio and the Curious Relationship with Cognate BioServices”.

On February 23, I posted on YBM:

“Is Jerry Campbell_ma… also Biotech Hawk?
Jerry – I’ve had you on ignore for quite some time now, but recently, I decided to take you off ignore since there were so many longs responding to your never-ending basher posts. I decided to go back and see when you first started posting as jerry, and when you first started posting on NWBO.

First, I read in one of your previous posts (let’s call that your pre-NWBO period) that you are a retired portfolio manager and a quant. Why on earth would a retired portfolio manager spend your time posting on this message board day after day with no position?

Second, I can see that you first started posting back in 2004 with 55 pages of posts. On page 44, you start posting on the NWBO message board (that begins your NWBO period). You’d never posted on the NWBO YMB prior to that.

Your first post on NWBO begins on July 18, 2014 at 2:36 p.m.

What’s interesting is that on July 17, 2014, BioTech Hawk published an article on Seeking Alpha entitled:
“Northwest Bio and the Curious Relationship with Cognate BioServices” with 157 comments. Now Biotech Hawk admits in his article that he held a short position in NWBO.

Your first post read:

“Some etiquette advice appears greatly needed based on first impression.

Just checked out this message board after seeing some NWBO longs whining about Seeking Alpha on the Suggestions Board. About what I expected.”

Now the subject of Cognate has been a favorite subject of yours on this board, as many longs here will attest to. Now perhaps you just wandered over to Biotech Hawk’s article, read some of the comments from our longs, and just became so fascinated with the whole subject, that you had to start posting endlessly on our message board about the same subject.

But I admit, this whole coincidence has got me to wondering if you may also be Biotech Hawk.”

Of course, he told me “I am not Biotech Hawk, nor do I know who [he] is.” And he has not posted since that day, after posting ceaselessly for months. We’ll see if Biotech Hawk shows up here to comment.

Hi Larry…….Thank you for again weighing in on NWBO….This a company I follow as close as I can.

Naturally, there is no way of knowing anything about cost….Doubt Linda will ever tell us….Endless speculation to follow…

It will be telling when ever the German Health System for the 10 different hospitals come up with a unified number for reimbursement……If we ever hear what that # is, we will at least have an amount of $$$ coming in per treatment…..Still will not know the cost of manufacturing, though….

On another note about manufacturing, the Brits yesterday said they will spend about 85 million somethings (dollars or pounds, don’t remember which) to build out a manufacturing plant for Live Cells…..I wonder if you know or anyone knows, where NWBO is at in the process of building out its new state of the art manufacturing plant in the UK???

I can see so many hot buttons coming up soon….The conference in March in Europe and the results that will be scientific and released….The collaboration….The reimbursement for “L”…The expansion of “D” into more hospitals and maybe Germany and England….More results on the compassionate “55”…..That just names a few……Someday, I hope, we hear from NWBO that enrollment in “L” is completed….I wonder if they will ever tell us that….Do they have to???
And, I wish with all my heart, that the DMC would un blind the “L” results and we get fast tracked for approval…..That would be an answer to my prayers….Many cell technologies are getting an early look and nod from the FDA, why not us???? I don’t want to lose sleep over that question, but it does loom over my head like a 1000 lb. rock….Anyway Larry, hope it will warm up where you are at and the snow all melt away and that NWBO becomes all that Linda and Les are promising and that the bashers will give up and get on board…..Thanks and cheers

I think L will be cheaper to make than CART because one dose of NWBO is only 1.25 million DCs co-cultured with 100μg tumor lysate compared to billions of T-cells. 12 doses of L are about 15 million DCs so probably no need to do several passages of cell culture.

I also listened to a webcast discussing T Reg cells on autoimmune disease. And reseachers disccussed the cost issues on the highly esteemed Science. The following is what they had to say in 2011,

“Because of the technical challenges of producing ample Tregs and the related high costs (nearly $40,000 per patient) alternative approaches are being pursued such as identifying drugs that spur Tregs to multiply within the body.”

The specific reference for the previous comment is the following statement from your blog relating to the conference you attended on Feb 9/10 at the Waldorf Astoria in NY.

“A paper discussing results from the phase 1 trial of DCVax Direct involving 40 patients will be presented at a conference in Europe in March. This will be the first comprehensive look at the data; so far we have seen information on only a few patients.”

I appreciate your very extensive and interesting work on this company which has convinced me to take an investment position. My impression is that repetition of the so-far disclosed results in most (or possibly all) patients would promote DCVax Direct to virtual “silver bullet” status for solid tumor cancers. In that case I would think that recruiting volunteers for placebo controlled trials would be very difficult. Who would want to risk assignment to the placebo group?

Do you have any guess about the up-coming scientific conference in Europe??? NWBO is supposed to attend and give data about something, maybe “D”…..Linda said the end of March….
Is she accurate?? Will they be somewhere and present something??? I am nervous and need to hear from you….. I hope this isn’t a “salted” mine…..If you happen to see this post and can give me your best knowledge answer, I would appreciate it….Cheers and the snow is melting, finally….

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